Friday, June 10 2022

From fintech loans to ship cargoes, tens of millions are now lent and borrowed on Maker dai while being secured by real-world assets.

In a bridge between the physical and the digital, with NFTs, Merkel Trees and P2P, as well as the legal structure of the old SPV world, your home can now borrow algorithmic tokenized dollars.

We start with Tinlake running on the Centrifuge Chain, this is a Polkadot Substrate Parachain. Here we have a P2P network where the document root is hashed, with many mechanisms in place to ensure privacy and auditability.

Merkel axes documents on Tinlake, May 2022

These documents become a unique token, an NFT, which is then linked to the Ethereum blockchain where a pool is created.

The pool has Tin and Drop tokens, using the same risk management mechanism as in traditional finance with Tin used to protect against defaults – meaning it is a high risk and low risk token. high yield – while Drop is relatively safe as all of the Tin should be consumed first, meaning it is a low risk, low reward token.

You give dai, you get Tin or Drop, or the initiator of the asset goes to Maker itself and hits it.

The asset initiator is wrapped in a special purpose vehicle (SPV). That being a specific company for a specific reason, here to have ownership, say invoices, through custody of the necessary legal documents that give it such ownership.

Technically, therefore, it is the SPV that borrows and gives the funds to the actual borrower, as well as to the entity you are lending to.

The project provides all the details across the whole mechanism, thus bringing us to the surface where we have approximately $86 million in tokenized real assets, with some $67 million used as collateral to borrow $35 million of DAI:

Aave Real World Assets, May 2022
Real World Asset Pools, May 2022

It’s the market for real-world assets on RWAmarket inspired by Aave. The Cauris Global Fintech Fund is a pool that “seeks to generate uncorrelated and excess risk-adjusted returns for its investors by providing secured loans to fintechs that lend to consumers and small businesses in the Global South and Europe”.

Console Freight “advances working capital financing to stakeholders involved in the international trade of goods and services.”

New Silver has nothing to do with silver, rather it is “a non-bank, technology-enabled lender primarily focused on providing real estate-backed financing for the US ‘fix and flip’ sector with a focus on single-family residential assets”.

There are many others, including institutional loans and gig economy payment advances like describe on their platform.

Real World Asset Wall (RWA), May 2022
Real World Asset Wall (RWA), May 2022

However, if we want to buy any of these tokens or even just deposit some USDc to lend, we come across the wall above where we have to go through a process.

They partnered with Securitize, an SEC-registered transfer agent offering compliant investor onboarding services.

So you have to give them your ID and, in theory, you also have to be an accredited investor (annual income of $100,000), because the plebs can’t have nice things.

However, you rely on the legal system to enforce defaults, so for this sort of thing you have to comply with all discriminatory laws, investment bans, monopoly protection “regulations” and poison pills. anti-competition.

Besides that, it’s pretty cool, but with all that, what exactly is the point of all the complexity and the decentralized backend of P2P when finally we trust the SPV based on an enforceable legal framework?

Except that those who enter can then freely trade with each other, but it doesn’t seem like the token can quite exit as we can’t find those markets on proper challenge platforms like AAve itself.

The manufacturer, however, should benefit because increased demand gives lenders higher interest rates, and obviously companies and businesses benefit because they get cash.

Do this hybrid challenge. Somewhat similar to traditional finance, but tokenized, although the tokens are a bit walled.

Still, there’s now nearly $100 million in total in that experiment, and so a new realm may well be in its infancy.


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